Poor management decisions and a light-touch regulatory regime were today blamed for the near-collapse of Royal Bank of Scotland in a long-awaited report from the City watchdog.
The Financial Services Authority (FSA) highlighted deficiencies in the management, governance and culture at RBS and said the deal which effectively broke the bank – the £50 billion takeover of Dutch bank ABN Amro – was carried out with inadequate due diligence.
The FSA said RBS proceeded without appropriate heed to the risks involved and with information which amounted to “two lever-arch folders and a CD”.
The report said a key factor in the bank’s demise was the management, led by chief executive Sir Fred Goodwin.
It said: “The multiple poor decisions that RBS made suggest that there are likely to have been underlying deficiencies in RBS management, governance and culture which made it prone to make poor decisions.”
However, the FSA also highlighted its own shortcomings in the lead-up to the collapse, saying it operated a flawed supervisory approach which failed to challenge RBS management.
It added: “This approach reflected widely held, but mistaken assumptions about the stability of financial systems and existed against a backdrop of political pressures for a ‘light-touch’ regulatory regime.”
Today’s report includes a recommendation that banks should gain regulatory approval for significant acquisitions and asks whether bank directors should be forced to prove their innocence in the event of a future failure.
But it said the FSA did not intend to pursue any new enforcement action against any of RBS’s former directors.